bc8G2-7

Doing Business 2015
Going Beyond Efficiency
Distance to frontier and ease
of doing business ranking
This year’s report presents results
for 2 aggregate measures:
the distance to frontier score
and the ease of doing business ranking,
which for the first time this year
is based on the distance to frontier
score. The ease of doing business
ranking compares economies with one
another; the distance to frontier score
benchmarks economies with respect
to regulatory best practice, showing
the absolute distance to the best
performance on each Doing Business indicator.
When compared across years,
the distance to frontier score shows
how much the regulatory environment
for local entrepreneurs in an economy
has changed over time in absolute
terms, while the ease of doing business
ranking can show only how much the
regulatory environment has changed
relative to that in other economies.
DISTANCE TO FRONTIER
The distance to frontier score captures
the gap between an economy’s
performance and a measure of best
practice across the entire sample of 31
indicators for 10 Doing Business topics
(the labor market regulation indicators
are excluded). For starting a business,
for example, Canada and New Zealand
have the smallest number of procedures
required (1), and New Zealand the
shortest time to fulfill them (0.5 days).
Slovenia has the lowest cost (0.0),
and Australia, Colombia and 110 other
economies have no paid-in minimum
capital requirement (table 15.1).
Calculation of the distance to
frontier score
Calculating the distance to frontier
score for each economy involves 2
main steps. First, individual component
indicators are normalized to a common
unit where each of the 31 component
indicators y (except for the total tax
rate) is rescaled using the linear transformation
(worst − y)/(worst − frontier).
In this formulation the frontier represents
the best performance on the indicator
across all economies since 2005
or the third year in which data for the
indicator were collected. For legal indicators
such as those on getting credit
or protecting minority investors, the
frontier is set at the highest possible
value. For the total tax rate, consistent
with the use of a threshold in calculating
the rankings on this indicator, the
frontier is defined as the total tax rate
at the 15th percentile of the overall
distribution for all years included in the
analysis. For the time to pay taxes the
frontier is defined as the lowest time
recorded among all economies that
levy the 3 major taxes: profit tax, labor
taxes and mandatory contributions,
and value added tax (VAT) or sales tax.
In addition, the cost to export and cost
to import for each year are divided by
the GDP deflator, to take the general
price level into account when benchmarking
these absolute-cost indicators
across economies with different
inflation trends. The base year for the
deflator is 2013 for all economies.
In the same formulation, to mitigate
the effects of extreme outliers in the